Long Beach sees first surplus in 10 years, begins discussions on FY 2014 budget

Just a year ago, Long Beach was dealing with a structural deficit that called for cuts to park programs, library services and police positions. Today, city officials are looking forward to a budget surplus for the first time in 10 years.
Long Beach city officials are now happy to report an anticipated $3.5-million surplus with no major reductions for next fiscal year. The positive outlook comes after the City has had to cope with consecutive deficits in the last decade, painfully slashing services and eliminating hundreds of employee positions.
“I’m more optimistic about Long Beach than I ever have been,” said Mayor Bob Foster at a press conference on Aug. 1 while unveiling his eighth and final budget after announcing last month that he won’t seek re-election. “This city is poised to do some great things. We’re going to have the money to rebuild ourselves and put in place fiscal disciplines, which is what will enable us to be much more successful in the future.”
City officials attribute the surplus to a combination of better economic conditions, the use of fiscal restraint, major pension reforms and an increase in property-tax revenue that has shifted to the General Fund after the State abolished redevelopment.
The City Council had its first budget hearing on Aug. 6, kicking off a series of discussions that will take place over the next several weeks. The Council is required to adopt the Fiscal-Year 2014 budget by Sept. 15.
The City is also fortunate next fiscal year to have $57 million in “one-time” funds from a windfall in oil revenue, property-tax money from the dissolution of redevelopment and other sources. The Council has already appropriated $12 million of those funds, leaving $45 million for one-time expenses.
Foster recommends using the revenue to pay for “capital” projects instead of ongoing needs. The mayor also strongly suggests the Council keep the City’s oil-price benchmark, used to guard the budget from oil-price fluctuations, at $70 per barrel of oil.
City Manager Pat West outlined a spending plan last week that includes: structurally restoring $2.3 million in recreational and police programs; adding back-to-back police and fire academies for the first time since 2008; major investments in streets, parks, playgrounds and libraries; and upgrading antiquated budgetary technology systems, among other improvements.
Foster also recommends using the $3.5-million surplus to build a reserve to offset anticipated deficits in coming fiscal years caused by likely pension-cost increases as the California public employee retirement system (CalPERS) modifies its rate structure. He cautioned the Council to resist squandering the funds on immediate city needs.
Though it’s unknown exactly how much pension costs will rise, city officials estimate the reserve would eliminate a projected $2.5-million deficit in 2015 and reduce a $2.3-million deficit expected in 2016 down to a $1.3-million shortfall, which the mayor said can be “easily managed.”
During the City’s first budget hearing, 6th District Councilmember Dee Andrews and 8th District Councilmember Al Austin both called for more funds to maintain and upgrade park infrastructure throughout their districts.
Andrews said the City’s decision to contract out services for park maintenance as a way to cut costs has led to “deplorable” conditions at parks in central Long Beach, with trash and decaying infrastructure.
Austin echoed the councilmember’s concerns, adding that many parks in the 8th District have also been left unkempt. “This contracting-out experiment went bad,” Austin said. “Many of our parks are suffering. I hope we’re not taking on more costs as a result of incompetence.”
West, however, assured the councilmembers that the largest one-time expenditure, $15 million, would go toward upgrading parks, playgrounds and library infrastructure next fiscal year, adding that it will be the “largest investment in city parks in decades.”
The budget calls for using one-time funds to pay for after-school recreation and youth sports at 14 parks and gym operations at Pan American Park.
Parks and recreation staff is expected to come back to the Council with more details on which parks would see upgrades to irrigation systems, a cost expected to total $1.1 million.
Austin and 7th District Councilmember James Johnson both asked West about exploring options to make after-school programs in the city an ongoing expense instead of just funding them on a one-time basis.
Austin said the Be S.A.F.E. (Summer Activities in a Fun Environment) program funded by Council office resources this year has been a “success story.” In addition, the Council has also allocated money to pay for the second Summer Night Lights program at Admiral Kidd Park, Drake Park and Martin Luther King Park that offers recreational activities for children to get involved in during the summer as a way to reduce violence and gang activity among youth. The program runs from 6pm to 9pm through Friday, Aug. 30.
Johnson applauded city management for allocating money for parks and recreation services but said funding the after-school programs permanently through the budget should only cost about $100,000 per year for parks in north and central Long Beach.
“We know by taking care of our children today we’re going to be preventing problems tomorrow,” he said.
West said city management would revisit options but said staff has always envisioned the programs as one-time expenses.
Third District Councilmember Gary DeLong, chair of the Budget Oversight Committee, asked financial management exactly how the Long Beach Police Department plans to fund police overtime, a new police academy and maintaining its level of gang enforcement next fiscal year.
According to a presentation on the proposed budget, the General Fund provides the police department in Fiscal-Year 2014 with a $189.7-million budget, which West said is 2.7 percent more, structurally, than the department’s budget for the current fiscal year. Financial Management Director John Gross clarified that the City has already built funds into the budget to pay for the police academy next fiscal year. He said $2.2 million in one-time funds will likely go toward police overtime and $600,000 in one-time funds will go toward maintaining the department’s gang detail, however, the police chief has discretion over these allocations.
Still, DeLong said he wasn’t satisfied with the answer. “It just isn’t clear to me how they’re going to do that (maintain the FY 2013 level for gang enforcement) if I don’t see the funds in the budget,” he said.
The proposed budget calls for 803 sworn police-officer positions, with one more police position than last year. One-time funds are expected to restore four full-time special service officers in the prisoner-transport unit, four full-time police-service specialists in the East Division, vice (including sex crimes) and the crime lab. The funds will also cover three full-time neighborhood-service specialists.
Both DeLong and 5th District Gerrie Schipske expressed interest in restoring fire engines in their districts after the engines had been eliminated due to budget cuts. Fire Chief Mike DuRee, however, said fire engines at Fire Station 8 in Belmont Shore or the downtown fire station would have to be restored before Fire Station 18 in east Long Beach.
Schipske also questioned whether the City would still have to implement a proposed alternative emergency-medical-services (EMS) delivery model since the City now has more funds. She said Long Beach would be a “guinea pig” for the program since no other city in Los Angeles County uses the model.
DuRee said the new EMS-delivery model, which has already been approved by Los Angeles County authorities, initially came out of “budgetary constraints,” but there is no data either in the state or nationally that would suggest the paramedic program would “constitute a degradation in service.” DuRee is expected to give the Council a full presentation on the new model before it is implemented in coming weeks.
Schipske added that the proposed budget lacks “performance measures” for all city departments to give residents an idea on how to gauge the efficiency of each department. “There’s no way for the taxpayers to know what the departments do and if they’re doing it effectively,” she said. West said he would look into providing at least “key” performance measures.
Johnson brought up that he wanted the Council to continue focusing on paying the City’s unfunded liabilities, adding that the City should “make sure we’re not passing on the costs of today’s services to future generations.”
He added that the Council should talk about the “cost of inaction,” such as the financial ramifications of not funding sick leave. “I know we didn’t include that, but I think it’s important for us to kind of understand,” Johnson said. “Certainly by not funding things, that’s a policy choice that will have consequences.”
City staff is planning to create an unfunded-liabilities reserve with funding from the elimination of selected skill-based pay. West said full presentations on unfunded liabilities would be presented to the Council and the Budget Oversight Committee in coming weeks.
West said the property-tax funding that has come into the City after the loss of redevelopment is welcome, however, it still comes at a price since redevelopment used to provide $100 million a year to pay for eliminating blight and providing economic development in neighborhoods. The elimination of redevelopment is also expected to cause a reduction in code enforcement and graffiti abatement.